Equity release is getting a lot of attention and hype these days as it becoming a recognised mainstream mortgage lending product. Equity Release Council figures for the first 9 months of 2014 have recorded over £1 billion of equity release loans been made. This is the highest ever on record & shows how the UK population have finally understood how these schemes can help someone’s finances in retirement.
It is totally different from other conventional mortgage schemes and can offer plenty for those in retirement. However, one area for consideration and some concern can be the equity release set up costs which can vary from lender to lender. Setting up any mortgage can be expensive if the correct advice has not been obtained in the first instance. An equity release specialist would have access to the best equity release deals & these could come with introductory offers such as free valuations & cashbacks.
The main charge equity release companies themselves levy is the lender application fee and can be anything between £0 and £995. The fee is usually deducted before it is sent to the solicitor for further processing; however with certain lenders they may offer the opportunity to add the fee to the equity release loan. Unless this is necessary (say for a maximum release) it would be unwise as by adding the lenders application fee to the loan will also result in this fee being charged interest upon also.
It is very important that a valuation of the property is completed which actually decides the amount of equity you are going to receive. Most of the companies will charge you for the valuation of your property, the amount of which is determined by the size of the estimated sale price. However, shop around as there are equity release brokers who can obtain a valuation, free of charge. Some of these worth mentioning are Aviva, Just Retirement and LV. This is indeed a great bonus for all those who have little savings and would struggle paying any upfront fees.
The next cost involved in setting up an equity release scheme is the solicitor’s costs. The Equity Release Council has made it compulsory to have a different solicitor acting for the lender and the applicant. This means that now you also have to pay the solicitor fees which should total approximately £600-£650 and it is highly recommended that you should opt for the one who is a member of ERSA (Equity Release Solicitors Alliance). ERSA solicitors specialise in equity release and therefore usually have quicker completion timescales & work for a fixed fee. Companies such as Ashfords, Equilaw & Goldsmith Williams are to name a few.
Since, this whole process is little bit complicated, you therefore need a qualified equity release adviser who can help in finding the best equity release scheme and thereafter the processing of the application. There are various companies in the market that are offering advisory services. You can opt for anyone of these companies depending upon how good their past experience is. Usually advisers charge you fees which range between £595 up to £1500 and always choose a company that will only ask for the complete payment once everything has been set up as per your requirements.
Paying upfront for any equity release advice is not best practice. Why should you? There are experienced equity release UK brokers who are confident that following their advice they are offering you the best deal possible. Brokers such as Equity Release Supermarket will also offer a no completion, no fee offering, confident of their ability to process applications quickly & effectively.
It is advised and recommended that you consult someone who has good experience and testimonials relating to their past performance and companies such as Equity Release Supermarket are one of the most competitive in this area.
These are the main equity release set up costs you might encounter.
Whenever you start looking at equity release products, you have to consider the fees as mentioned above, but you also have to gain an idea of the cash lump sum you can receive for the equity release product. There are a couple of things that determine the amount to be released: your age and the property value and in some instances the health of the applicants.
The importance of assessing whether equity release is right for you or not, is based on the costs and spending funds. There are a couple of ways around this. First you find a company willing to roll the costs of gaining an equity release into the loan. This means the costs are part of the lump sum so you have the money at closing to give to the various people involved in the process.
If the funds are put into the loan it also means this is more you have to repay and thus less you actually get to use for your retirement. Additionally some of the costs are required upfront which means you need that money before you can proceed. These costs are usually non-refundable should the case not proceed for any reason such as down-valuation or legal issues with the property.
As you calculate the different amounts you might be able to borrow in equity release, be careful in making a snap decision. While you may feel that the equity release calculator leaves you with little option, you may find there is a product out there you just need to take the time to research things. It is another reason that you want an independent equity release adviser in on the deal. They can look for products based on your needs and see if there is something more beneficial for your situation than what you might have found during your search.
When it comes to equity release set up costs, you certainly need to calculate the amount you believe you can get for the loan and then determine if it is enough to cover the set up costs and the personal expenditures you require too. Remember, costs can be minimized by shopping around & costs are not always fixed, but negotiable, particularly some of the more expensive brokers charging over £1000 to process your equity release application. After all, the money is better off in your pocket & used for your retirement.Back